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State Auditor Mike Harmon has released the findings of his office’s long-delayed examination into the governance of the University of Louisville Foundation, finding “serious weaknesses” under the administration of former President James Ramsey relating to transparency, oversight and financial decisions.

Former Auditor Adam Edelen initiated the review last year following numerous media reports and concerns expressed by some UofL trustees about a lack of transparency within the Ramsey administration and the large compensation given by the foundation to Ramsey and his top staff. Auditor Harmon continued the examination this year, with the final report based on the office’s interviews with 20 individuals at UofL and review of thousands of pages of documents.

State Auditor Mike Harmon

Harmon’s report has eight major findings and recommendations, leading with a criticism that validated one of the main concerns that initiated the audit — a lack of transparency with investigators from his office. The report notes that their requests for documents and information were met with “continued delays and unclear or inconsistent responses,” and “the difficulties encountered in obtaining consistent, complete, and accurate information timely during the examination exemplify the need for improved accountability and transparency within the Foundation.” It also noted that the attorney general’s office ruled the foundation has violated the Kentucky Open Records Act on eight occasions in this year alone.

The examination also found that administrative operations of the university and the foundation — both headed by Ramsey in the period examined — were at times indistinguishable and led to ineffective governance. It specifically cited Ramsey’s dual role as president and the “ambiguous lines of authority and responsibility” between the university and foundation as creating “an enigma leading to confusion and questions of transparency,” which ultimately “resulted in management having too much influence and a lack of checks and balances.”

Other findings include:

Conflicts among members of the UofL Board of Trustees and the Ramsey administration created an environment of distrust, which led to administrators and Ramsey supporters on the board “withholding information at Board meetings in attempts to avoid further problems.” This “lack of transparency and reporting of valid business-related information draws into question whether UofL Trustees were able to perform their fiduciary duties.”

Endowment funds totaling $67 million were loaned to foundation affiliates without prior notification to or approval by the UofL Board of Trustees, with Ramsey himself “unilaterally authorizing” those loans. The report recommended refraining from such loans in the future.

Ramsey’s appointment of his longtime aide Kathleen Smith to take over as chief administrative officer just before his resignation from that position at the foundation violated the organization’s own bylaws. Not only was this action not formally introduced or acted upon by the foundation’s board, it also awarded Smith future financial benefits if she leaves that position involuntarily, which the report states “is particularly questionable in light of ongoing public concerns regarding the accountability, transparency, and governance of ULF.”

The board of the foundation compensated Ramsey beyond the amount approved of by the university’s board of trustees and the amount provided under the terms of his contract.

UofL’s chief financial officer Harlan Sands was not included as an ex officio member of the foundation board’s finance committee, which is a direct violation of the foundation’s bylaws, which “further impaired the accountability and transparency between the two entities.”

UofL Foundation board members did not receive any orientation on their roles and responsibilities, despite the growing complexity of the nonprofit’s operations.

In a joint letter responding to the auditor’s examination, UofL’s acting President Neville Pinto and new foundation board chairwoman Brucie Moore stated they “agree overall” with its findings. They also stressed that “needed changes to the leadership of the foundation and some of its policies and procedures” have already taken place in recent months. These changes include Ramsey’s resignation, the resignation of former board chairman and chief Ramsey defender Bob Hughes, the hiring of a law firm to greatly expedite open records requests, and placing Smith on paid administrative leave.

Pinto and Moore also noted that there is now a “vastly improved working relationship” between board members of the university and foundation, a new foundation committee to review its governance and organizational structure, and that both the university and foundation have finally joined the Association of Governing Boards of Universities and Colleges, an organization assisting with best practices that almost every major college in the country belongs to.

While Pinto and Moore expressed agreement with the examination, Ramsey also submitted a response to the auditor’s office that strongly disagreed with and criticized most of its findings, even saying the audit itself “was not necessary.” He took particular issue with its finding criticizing the Ramsey administration as having too much influence without proper checks and balances.

“Your examination does a great disservice to the outstanding individuals who served on those boards. Neither I, nor — to my knowledge — other institutional officers, acted without Board authority,” wrote Ramsey, adding that “only in the past year or so was it raised as an issue, primarily in the media.”

Ramsey — who took issue with several of the examination’s recommendations as being none of its business — concluded by stating that the extensive work of the auditors was not needed, adding that “what really is at stake here is the independence of the ULF Board from political influence.”

Auditor Harmon replied to Ramsey’s response, rebutting the claims Ramsey had made about why each finding was inaccurate. He took particular issue with Ramsey’s claim that their slow and inconsistent response to investigators’ requests was due to the “small staff” at the foundation, noting that his administration repeatedly “rejected or ignored” suggestions by the auditor’s office to speed up the process. Harmon added that “the delays and inconsistencies continued throughout the process until there was a change in management, at which time the majority of outstanding requests were quickly addressed.”

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Joe Sonka is a staff writer at Insider Louisville focusing on government, politics, education and public safety. He is a former news editor and staff writer at LEO Weekly and has also freelanced for The Nation and ThinkProgress. He has won first place awards from the Louisville Metro chapter of the Society of Professional Journalists in the categories of Health Reporting, Enterprise Reporting, Government/Politics, Minority/Women’s Affairs Reporting, Continuing Coverage and Best Blog. Email him at [email protected]